In Scots law, the primary remedy for breach of contract (i.e. contractual non-performance) is specific implement (the equivalent of the Common law’s specific performance):¹⁷ by ‘primary remedy’ is meant that, except in certain exceptional cases, a party which has suffered a breach of contract is entitled to a court order that the party in breach perform the duty in question. This primary remedial entitlement in theory takes pressure off the need to develop damages awards in contract which might strip a contract-breaker of profits made through breach; instead, the victim of the breach is entitled to the actual performance promised, enforcing such entitlement by a request for specific implement. The extent to which, in practice however, specific contractual duties are enforced in Scotland which would not be enforced in Common law countries is debateable. One divergent field, however, is that of ‘keep open’ and trade clauses in commercial leases (i.e. clauses requiring tenants of commercial premises to keep them open and trade from them): these have been enforced, via specific implement, in Scotland when similar clauses have not been so in England.¹⁸ The Scottish landlord thus gets to enforce occupation by a trading tenant, when the English landlord will likely have to rely on damages assessed merely by reference to likely losses (often very hard to assess, and usually worth a lot less to the landlord than occupation by a trading tenant) and not to any profit made through breach.

As for the most commonly sought contractual remedy – damages – the basic principle for assessing such damages is clear: damages are assessed by reference to the loss suffered by the victim. Such loss is measured primarily by reference to the so-called performance interest (i.e. by considering the position in which the innocent party would have been had the other party’s duty been performed),¹⁹ though there are cases where the so-called restoration, or status quo ante, interest (assessed by reference primarily to the victim’s wasted expenditure) has been awarded instead. The general approach to compensatory damages expressed for English law by Haldane LC in British Westinghouse Electric is thus accepted as a formulation of the general totality of loss which can be claimed in damages for breach of contract in Scots law: “[t]he fundamental basis [of damages] is thus compensation for pecuniary loss naturally flowing from the breach”.²⁰ This measure encompasses both damnum emergens (losses rendering a party worse off) and lucrum cessans (lost opportunities/profit of the victim).

Because damages for breach are not fault-based, it matters not to their assessment by a Scottish court whether the breach was intentional or inadvertent (i.e. there are no greater damages available for intentional breach). Furthermore, and crucially for the present discussion, damages based upon any profit made by the contract-breaker are not permitted (even if they were a foreseeable result of the breach):²¹ this rule is clearly set out in the leading case of Teacher v Calder. ²² This common law rule cannot be evaded by the use of an agreed damages clause in the contract entitling the party in breach to an amount equalling any profit made upon breach by the defaulting party, as a Scottish court will only enforce an agreed damages clause to the extent that it embodies a reasonable assessment of the likely losses to the victim which will flow from the breach in question.²³

Are any exceptions made to this rule? It has been said that the availability of so-called ‘violent profits’ in lease cases is one such exception. Violent profits are a financial award which may be ordered by a court to be paid by a tenant who remains in occupation beyond the agreed end date of the lease without the permission of the landlord. Such an award is designed to act as a deterrent against tenants refusing to quit the leased premises at the agreed date, and – in some cases at least – to strip the tenant who refuses to quit of profits made through continued unlawful possession. In urban leases, a somewhat arbitrary amount of double the agreed rent for the period of unlawful possession has become established as the measure of such violent profits: this arbitrary level of the award matches neither the likely losses of the landlord nor (except by chance) any profit made by the tenant through a refusal to quit the premises. However, in other leases, the courts have assessed violent profits according to the measure of the greatest profit that the landlord could have made either by possessing the leased subjects himself or by letting them to others, together with the measure of all losses which the landlord may have suffered at the hands of the wrongful possessor.²⁴ Is this gain stripping? Indirectly perhaps, though note that the measure is of the landlord’s likely lost profits, not the actual gain of the tenant. Given the varying ways in which violent profits may be assessed, it is too simplistic (and inaccurate given the idea of damages discussed earlier) to call the remedy ‘damages’ or even ‘penal damages’, though such usage exists;²⁵ it may perhaps be arguable that (indirect) gain-stripping forms part of the award in some cases (only for non-urban leases), but strictly such cases are focused on compensating the landlord’s losses, both damnum emergens and lucrum cessans.

A related question concerning the occupation of land or buildings is how to deal with cases where there is never any express entitlement to occupy to begin with. The Scottish courts’ approach to such cases has often been to say, in vague terms, that such occupation gives rise to a ‘presumption to pay’, the occupier being able to counter such presumption by demonstrating a clear agreement that the occupier was entitled to occupy without charge. Speaking of a ‘presumption to pay’ is not however sufficient to determine whether the basis of the requirement to pay lies in contract (under an implied lease)²⁶ or in unjustified enrichment, or to identify the appropriate measure of recovery. The answer to the first question is not necessarily provided by the answer to the second. As to the second question – the measure of recovery – the courts have variously required occupiers to pay a ‘reasonable sum’,²⁷ a ‘fair value’,²⁸ or a ‘market rent’.²⁹ Some such awards (especially market rent) smack of a quantum meruit approach to valuation, which is itself more suggestive of a deemed contractual analysis; however, in some cases where the courts have explicitly made an award in recompense for unjustified enrichment, the measure of the award has also been assessed by reference to the market rent.³⁰ Looking at the body of such cases, it must be admitted that there has often been a judicial vagueness in specifying the basis of recovery, and also that, while some cases have justified awards as compensation for the rent lost to the landlord, others have used language more indicative of a desire to prevent the occupier from unjustifiably gaining from the occupation. Gain-based awards have therefore played some part in this area of the law (albeit that whether they are based in contract or unjustified enrichment is not always clear).

Leaving aside cases of the occupation of property, there is the further contractual issue of what status decisions such as Wrotham Park ³¹ (and Experience Hendrix)³² have in Scots law, i.e. do cases of ‘breach of covenant’ (that is, breach of a specific contractual undertaking not to do a specific act) give rise to an entitlement to an award which goes beyond any loss made by the victim of the breach (which may be nothing)? The short answer is that it is unclear: neither Wrotham Park nor Experience Hendrix have been directly applied in Scotland. In any event, are such cases actually about stripping gains from defendants? When such cases have arisen in England, the courts have permitted recovery in damages in a fictional measure (without the need to demonstrate any loss), such measure being the amount which the court considers the victim of the breach might reasonably be imagined to have charged for a relaxation or waiver of the covenant. Many consider such awards to be ‘gained-based’ or as designed to ‘disgorge profits’ from the party in breach: such an argument seems to proceed from the basis that, by having evaded a possible payment for a waiver/relaxation, the defendant has ‘gained’ because it is better off than it would have been had it paid for such a waiver/relaxation. However, the courts have accepted that such awards are appropriate even in cases where it is clear that the claimant would not have agreed to any such waiver. As the court is assessing damages according to a deemed (albeit fictional) performance interest loss by the claimant (the claimant gets what it has theoretically lost from not being able to bargain for the relaxation or waiver, i.e. there is compensation for imagined lucrum cessans), there seems to be a stronger case for not classifying this sort of recovery as genuinely ‘disgorgement’ in nature.

Moving away from damages, there is also the question of whether an ‘account of profits’ (not classed as a damages award, but as a separate species of remedy) of the sort seen in Attorney General v Blake ³³ is ever available in Scots law for breach of contract. Such a remedy was said to be justified in Blake on account of the quasi-fiduciary position in which the defendant stood towards H.M. Government, for whom he had worked in the British Secret Intelligence Service, his conduct being in breach of a contractual duty of confidence which he owed. However, when the ratio of Blake was later applied in Esso Petroleum v Niad,³⁴ no such quasi-fiduciary relationship was present. It is very difficult to narrate a justification of the award of an account of profits in either case (the justification that a normal award of damages would be inadequate is too broad) which would be sufficiently tightly drawn to prevent inroads being made into the general rule that breach should not give rise to a remedy based upon the profit made by the breaching party. Neither case has been applied in Scotland, so, as with the breach of covenant cases, the status of awards for an accounting of profits in similar circumstances is doubtful. Breach of a clear fiduciary duty (discussed below in the section “Breach of Fiduciary Duties”) is of course a quite different matter, in which an accounting of profits is an available remedy (as it is in infringement of intellectual property cases, also discussed below, in the section “Conclusions”).

In delict (and note, Scots law has not just a number of nominate delicts, but also a general action for the reparation of wrongly inflicted harm), the principal remedy is that of damages, with interdict (the equivalent of the Common law injunction) also being available to prevent anticipated harm. Where interdict is granted, it may of course have the effect of preventing a defender from making a gain through delictual conduct in the first place.